Disappointment in the U.K. Copyright Tribunal's refusal to overturn its drastic reduction of tariffs charged to the hospitality sector dominated discussions at the Annual General Meeting of PPL, the U.K. music licensing organization, held today (June 9) in London.

"We're wholly supportive of the concept of the Copyright Tribunal; what we do needs supervision," said Fran Nevrkla, chairman/CEO, in his opening speech. "The Copyright Tribunal is the appropriate body but only if it is properly funded, resourced, informed and pays some attention to the real world out there."

His statement comes as PPL, which collects performing-rights royalties for record companies and performers, unveiled its financial review for the year ending Dec. 31, 2009.

Despite generating record revenues of £129.6 million ($187 million), a 2% jump from the previous year, the Tribunal's decision will force the organization to refund £18.1 million ($28.1 million) to licensees in the hospitality sector. This cuts actual 2009 revenues by 12.7% year-on-year to £111.4 million ($160.8 million).

As reported by Billboard Biz (Oct. 22, 2009), last year the Tribunal rejected PPL's new three rates for background music used in pubs, shops, plus offices and factories

PPL wanted to charge larger establishments more than smaller ones; this amounted to between £100 ($144.30) and £500 ($721.50) a year, depending on the premises' floor size, excluding the VAT sales tax. Instead, the Tribunal mandated that hospitality establishments of all sizes should pay the same reduced rates, which came to just over £100 annually.

The Tribunal's rejection followed complaints by the British Beer and Pub Assn. and the British Hospitality Assn., which claimed PPL's were unfair.

'Shocking'

"To say that PPL found last year's U.K. Copyright Tribunal decision hugely disappointing, if not shocking, is an understatement," Nevrkla added in a statement also issued today.

Finance director Ben Lambert also stated that the required £18.1 million refund to licensees "was a setback for PPL and for our members."

Peter Leathem, executive director, added: "It means 97% of bars and 80% of shops are all paying the same fees of £108.75 ($157) a year. We're not happy with the position we've reached."

Leathem also questioned the U.K. government's decision to give the Tribunal the statutory role of acting as an investigatory body, a decision that "applied only to the PPL. That placed the Tribunal in a difficult position without the ability to have cross-examination [of witnesses]. Without its decision, we were going to have a successful year."

Speaking to Billboard.biz, Leathem insists that PPL is determined to challenge the Tribunal's decision, although the High Court has already ruled against PPL on appeal (Billboard.biz, Feb. 12). "We're in the process of considering what steps to take going forward because what the government conceived hasn't worked," he says.

Further Refunds TBC

Leathem explains that the £18.1 million refund is coming from "a provision we made for [refunds for] 2006, 2007 and 2008 [financial years]" after the government gave PPL the statutory right to license premises for music usage in 2003.

He admits it is still not clear whether any more refunds will be required for the 2009 calendar year: "We shall have to go through the refund process first," he said, which will determine how much each licensee is owed.

Leathem also believes that by the time PPL collects the surcharge penalties, which the law allows the organization to demand for late payments, PPL might not have to face significant refunds for 2009.

He also sees new income coming from the non-paying premises, which PPL is determined to chase for fees. Additionally, the government is to allow PPL to license "the third sector," non-profit operations such as charities and government buildings, which represent about one-fifth of the U.K. economy.

However, he admits, "There's still plenty of work to be done."

Public Performance Down 10%

PPL's AGM also disclosed that the Tribunal decision led to a 10% fall in revenues from public performance and dubbing, which generated £48.9 million ($70.6 million) and accounts for 38% of the total income.

Earnings from broadcasting and online, representing 45% of total income, grew 2% to £59.1 million ($85.3 million). This was despite the fact that commercial radio delivered a 9% fall in revenues because of the slump in advertising.

However, licenses to the growing number of digital TV and radio platforms, plus renegotiated deals with commercial TV networks like Channel 4, ITV, Five, and satellite broadcaster BSkyB helped boost earnings.

A New Rights Appointment Agreement has been set up to cover any new media platform that might distribute music in the future.

Holland No. 1 For International

The most robust revenues came from international, which reported a 40% jump to £21.6 million ($31.2 million). It was boosted by new agreements with overseas sister organizations. "International used to contribute absolute zero a few years ago," Lambert added. "Today, it represents about 17% of our revenues."

The Netherlands made the biggest single contribution with £8.6 million ($12.4 million), followed by Sweden (£1.8 million), Spain (£1.7 million), Denmark (£1.5 million), Ireland (£1.2 million), Japan (£1.1 million), France (£1 million), Switzerland (£1 million) and the U.S. (£0.7 million).

Leathem also revealed that the U.S. income-tax authority has given PPL a special status that allows the organization to collect the gross revenues from U.S. copyright societies, instead of having 30% of the income withheld.

Dispute Process

Also announced at the AGM was the new Dispute Resolution Processes that launched today. The initiative aims to use legal experts and music-industry veterans to resolve disputes among rights owners such as those questioning the rightful ownership of tracks, or which studio musicians performed on a particular recording.

Speaker Ian Mill QC, joint head at law firm Blackstone Chambers, who helped set up the framework, said: "I have witnessed the frustrations of performers and songwriters that resort to courts. The advantage of PPL's procedure is that it can be flexible, which is not available in the court system, which has one set of rules."

Keynote speaker Roger Wright, controller of the classical music dominated BBC Radio 3 and director of the BBC Proms, commented on the controversial move by the public broadcaster to shutter the 6 Music digital radio station. "I think it's great to have that sort of passionate views, which have clearly been heard by the [BBC] management," he said. "In fact, it was good to see how audiences responded to the proposal of closing it down; because [it revealed] the lack of awareness of our digital stations, which is quite shocking."

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